Tel Aviv: The 12-day Israel-Iran armed conflict has reignited concerns in the global economy, raising questions about its potential impact on commodity prices and the possibility of triggering a new crisis. Risk perception in the global economy surged as Israel launched missile strikes on June 13 targeting Iran's key infrastructure, while Tehran's retaliation sent shockwaves through the energy markets.
According to Anadolu Agency, the attacks on Iran's oil infrastructure have disrupted global oil supplies, and rumors of the closure of the Strait of Hormuz have pushed oil prices upwards. The narrow waterway, which connects the Persian Gulf to the Sea of Oman, is crucial for transporting oil and liquefied natural gas produced in the Middle East to world markets.
Analysts predict that Brent crude oil prices could rise to $110-130 per barrel if the Strait of Hormuz is closed, potentially leading to a regional conflict and making price estimates more challenging. Such a closure could also cause a 0.8% decline in global gross domestic product (GDP).
These developments are impacting not only energy prices but also maritime transport. Heightened military and political tensions around this critical route are driving up insurance costs and freight rates, adding to the costs of international trade.
The US economy, in particular, is expected to face significant negative consequences, with a debt of $37 trillion, inflationary pressures, and ongoing trade tensions with China and other countries. Washington's tariffs and protectionist trade measures, coupled with rising tensions in the Middle East, have pushed up energy prices and reignited fears of inflation and recession. Analysts warn that this conflict could lead to stagnation for the US economy.
A $10 increase in oil prices is expected to raise consumer inflation by 0.5%. If Brent crude oil reaches $110-130 per barrel, US inflation could spike to 5.5%, potentially forcing the Federal Reserve to raise interest rates and derailing the country's fragile economic recovery.
The conflict is costing Israel approximately $200 million per day, posing a significant threat to the US, Israeli, and global economies. Rising inflation, oil prices, and supply disruptions are just the beginning of the challenges. Analysts suggest that Israel's tensions with Iran are more costly than its previous conflict in Gaza, with anti-missile systems like David's Sling and Arrow 3, along with F-35 deployments and munitions, contributing to the financial burden.
If the conflict persists for a month, Israel is estimated to incur costs of around $12 billion. Additionally, reconstruction costs in Israel due to missile attacks are expected to exceed $400 million.